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ELASTICITY- IS IT ALL THEORETICAL???


PRICE ELASTICITY OF DEMAND/SUPPLY
The usefulness of price elasticity for producers
Firms can use the concept of price elasticity of demand (PED) to predict the following:

The effect of a change in price on the total revenue & expenditure on a product.
The likely price…

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ELASTICITY- IS IT ALL THEORETICAL???




INCOME ELASTICITY OF INCOME (YED)
How do businesses make use of estimates of income elasticity of demand?
Knowledge of income elasticity of demand for different products helps firms predict the effect of a
business cycle on sales. All countries experience a business cycle where actual…

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ELASTICITY- IS IT ALL THEORETICAL???





ANCILLARY INFORMATION
Substitutes: With substitute goods such as brands of cereal or washing powder, an increase in the price
of one good will lead to an increase in demand for the rival product. Cross price elasticity for two
substitutes will be positive. For example, in…

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ELASTICITY- IS IT ALL THEORETICAL???


Source: GFK report on Consumer Spending Trends, July 2006

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